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EDHEC Asset Management Education TILL & LHABITANT Commodities Seminar

 The State of the Art in Commodities Investing: Contents and Outline

Course Contents

This intensive two-day seminar builds upon the expertise and recent work of Hilary Till and François Serge Lhabitant and incorporates the latest results of alternative investment research.
Contents Day One:
 The first day of the seminar addresses such questions as:

  • What are the unique characteristics of natural resources?
  • What are the sources of returns in commodity investment?
  • What is the case for commodities as an asset class?
  • How to integrate commodities in strategic and tactical asset allocation
  • How to optimise the diversification properties of commodity programmes
  • How to use commodities as a hedge against inflation & extreme risks
  • Is there a case for investing through CTAs?
  • How to decide between active and passive commodity investing
  • What are the advantages and disadvantages of the main commodity vehicles?
  • How to choose between competing commodity indices

 Course Outline Day One

I. COMMODITY FUNDAMENTALS
A. Commodity Types and Markets

B. Fundamentals of Commodity Futures
  • Commodity pricing theory
  • Statistical behaviour of commodity prices
  • Key concepts
  • Term-structure & commercial-hedge-pressure as return drivers
II. COMMODITIES AS AN ASSET CLASS
A. Commodities as a Source of Diversification
  • Risk measures & commodities
  • Commodities as a diversifier of traditional portfolios
  • Optimal diversification within commodity portfolios
B. Asset Allocation with Commodities
  • Risk premium of commodities and other asset classes
  • Commodities in strategic asset allocation
  • Commodities as a protection against inflation
  • Hedging extreme risks with commodities
  • Tactical asset allocation with commodities
C. Buy-and-Hold versus Active Trading in Commodities
  • Systematic futures trading with statistical methods
  • The behaviour of CTAs’ returns
  • CTAs vs. direct commodity investing
III. INVESTMENT OPPORTUNITIES
A. Investment Vehicles
  • Direct investments, equities & mutual funds
  • Investments in commodity indices through derivatives & funds
  • Managed futures
  • Natural resources hedge funds & fund-of-funds
B. Commodity Indices
  • Performance attribution
  • Economic sources of return
  • Comparative review of major indices
C. Commodity Futures Programmes
  • Performance, benefits, & limitations
  • Key variables for tactical asset allocation
  • Case Studies: Gasoline (hedge pressure), Copper (scarcity), Coffee (weather-fear)
Contents Day Two:
 The second day of the seminar addresses such questions as:
  • How to create successful commodities futures programmes
  • What are the risk-management techniques specific to commodity investing?
  • What are the opportunities and the pitfalls in commodity market-microstructure strategies?
  • How to manage the mismatch between strategy and reporting horizons
  • How to implement an institutional commodity programme
  • How to carry out due diligence when selecting natural-resources managers
  • What are the key lessons from recent energy-trading debacles?

 Course Outline Day Two

IV. DESIGNING A SUCCESSFUL COMMODITIES FUTURES PROGRAMME
A. Investment Process
  • Trade discovery, sizing, entry & exit, portfolio construction, risk management
  • Strategy bucketing, balancing of long- & short-options-like trades
B. Risk Management
  • Strategy & portfolio level VaR, incremental risk measures
  • Monitoring beta risks
  • Structural breaks
  • Scenario testing
  • Inadvertent concentration risk
  • Event risks
  • Seasonally-varying correlations & emerging correlations
  • The monitoring of risk-asset deleveraging
  • Case Studies: May/June 2006 and February 27, 2007
  • Macro portfolio hedging
  • Case Study: The aftermath of hurricane Katrina
C. Commodity Market Microstructure
  • Floor, side-by-side, & electronic trading
  • The challenges of nodal liquidity
  • Case Study: Natural gas calendar spreads
D. Risk Tolerance and Implementation Discipline
  • The issue with tick-by-tick evaluation of long-term strategies
  • Case Study: Heating oil calendar spreads
V. IMPLEMENTING AN INSTITUTIONAL COMMODITY PROGRAMME
A. Optimal Allocation to Commodities

B. Choice of Benchmark

C. Selection of Investment Vehicles

D. Due Diligence
  • Mitigation of business risk via background checks & verification of track records
  • Investing through a managed account
  • Fraud & weak infrastructure considerations
VI. CASE STUDIES: LESSONS FROM RECENT ENERGY TRADING DEBACLES

EDHEC Asset Management Education TILL & LHABITANT Commodity Seminar: